Goodyear prices; high-yield secondary firms; Club Car volatile; Great Lakes gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 13 – Goodyear Tire & Rubber Co. showed up in the high-yield Thursday market with a drive-through acquisition financing offer.

Meanwhile, the secondary space reversed course and pared its losses from the previous session with the cash bond market up about ¼ point.

“It just shows the fickleness of the market,” a source said. “These are the same credits with the same stories. Prices shouldn’t fluctuate this much.”

While there was a firmer tone to the space and paper was better bid, there was still an element of caution given the negative tone over the past few sessions, a source said.

While the overall market was strong on Thursday, the energy sector underperformed with several names lower as WTI crude oil futures dropped $2.28 or 3.45% to settle at $63.80.

New paper continued to dominate the tape although the deals to clear the primary market on Wednesday followed different trajectories.

Club Car LLC/MajorDrive Holdings IV, LLC’s 6 3/8% senior notes due 2029 (Caa2/CCC+) were volatile with the notes under water early in the session but closing the day flat.

Great Lakes Dredge & Dock Corp.’s 5¼% senior notes due 2029 (B2/B) continued to outperform with the notes continuing to gain after a strong break.

Meanwhile, funds continued to leave the space with high-yield mutual and exchange-traded funds experiencing outflows of $672 million through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

Three issuers on Thursday

The high-yield new issue market remained active on Thursday, with four junk-rated, dollar-denominated tranches from three issuers, for a combined total of $2.55 billion.

Two of the three issuers had been in the market overnight.

Executions, and post-pricing trading levels continued to suggest vigorous demand.

All tranches priced at the tight ends of talk.

Goodyear Tire & Rubber Co. appeared at the drive-through window with a big, two-part bullet deal backing the Akron tire manufacturer’s acquisition of Cooper Tire & Rubber Co.

It included $850 million of 5% eight-year notes and $600 million of 5¼% 10-year notes, with both tranches pricing at par.

UK-based Atlantica Sustainable Infrastructure plc priced a $400 million issue of 4 1/8% seven-year green notes (BB+/BB+) at par.

The deal was trading at 101 bid, 101½ offered late Thursday afternoon, a trader said.

And Sotheby's came with a novel structure, pricing a $300 million issue of BidFair Holdings Inc. 5 7/8% eight-year automatically exchangeable senior unsecured notes (Caa1/B-) at par.

The notes broke to par ¼ bid, 101¼ offered, the trader said.

BidFair Holdings, which acquired Sotheby's in June 2019, is the initial issuer.

The unsecured notes will be automatically exchanged for senior secured notes due June 1, 2029 (B2/B+), and the issuer will change to Sotheby's, with BidFair as a co-issuer, as soon as Sotheby's has sufficient debt-, liens- and restricted payment capacity to secure the issue.

The Sotheby's deal came with meaty, cumulative coupon step-ups that would be triggered should Sotheby's prove unsuccessful at meeting the prescribed thresholds: 100 basis points after Aug. 31, 2021, and another 150 bps after Nov. 30, 2021 (see related stories in this issue).

Thursday's action left an empty active new issue calendar heading into the Friday session.

Club Car swerves

Club Car’s 6 3/8% senior notes due 2029 were volatile in high-volume activity on Thursday.

The notes were trading “ugly,” early in the session and dropped as low as 99 bid, 99¼ offered, a source said.

Flippers were shedding the paper, which met with little to no resistance from underwriters.

However, the 99-level proved to be a critical support level for the notes with buyers becoming involved and walking the notes back up.

The 6 3/8% notes climbed throughout the afternoon with underwriters bidding the paper up, a source said. The notes closed the day at par bid, par ¼ offered.

The notes were the most actively traded in the secondary space with $105 million in reported volume.

Club Car priced an upsized $525 million, from $450 million, issue of the 6 3/8% notes at par on Wednesday.

Pricing came in the middle of yield talk in the 6 3/8% area.

Great Lakes outperforms

Great Lakes’ 5¼% senior notes due 2029 continued to outperform on Thursday with the notes posting gains after a strong break.

The 5¼% notes were up another 1/8 to ¼ point to close the day at 102¼ bid, 102¾ offered, a source said.

The notes remained active with $25 million in reported volume.

The notes had a strong break and closed the previous session on a 102-handle.

Great Lakes is a well-known and well-liked credit, sources said.

The strong performance of the notes was attributed to the company’s fundamentals and the small size of the issue.

“People are comfortable with the credit and there’s not a lot out there,” a source said.

Great Lakes priced a $325 million issue of the 5¼% notes at par on Wednesday.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

Indexes mixed

Indexes were mixed on Thursday.

The KDP High Yield Daily index fell 5 points to close the day at 69.56 with the yield now 3.92%.

The index was down 8 points on Wednesday and 10 points on Tuesday after gaining 2 points on Monday.

The ICE BofAML US High Yield index shaved off 1.6 bps with the year-to-date return now 1.911%.

The index was down 15.4 bps on Wednesday and 26.6 bps on Tuesday after gaining 5.4 bps on Monday.

The CDX High Yield 30 index gained 29 bps to close Thursday at 109.38.

The index dropped 40 bps on Wednesday, 11 bps on Tuesday and 25 bps on Monday.

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